Fix Spouse’s Credit Before Buying a Home

I’m getting married in a few months, and I’m confused about what happens to our credit after we’re married. If we keep separate credit cards, then everything else would stay separate, too, right? But what if we want to buy a car or a house? My fiance doesn’t have the best credit, but I have great credit. Would I have to sign the loan myself to get a good rate? – Kim

Hi Kim,

Congrats on your upcoming wedding. What an exciting time for you!

And congrats also on looking ahead. The fact that you are already planning ahead and considering how your fiance’s credit could impact the two of you is a good sign that you have the kind of proactive attitude needed to build a solid financial future.

You’re absolutely right that, as long as you keep separate credit cards, your credit histories and credit reports will stay separate. In theory, your spouse’s credit might improve if you were to add him as an authorized user on one of your credit cards. This is a practice called piggybacking. If someone is added to a credit account with a good credit history, the positive credit habits associated with that account will show up in that person’s credit report and boost his or her credit score.

However, while piggybacking can offer a short cut to improve credit scores, sharing credit cards is not something I’d recommend — especially not for newlyweds. When it comes to marriage and finances, I’m of the school of thought that good fences make good neighbors. And while you two will want to merge your finances more and more (and hopefully completely) over time, taking it one step at a time will be easier on your relationship.

Sharing a credit card means that you both will have to agree on what gets purchased, who pays the bills and how much of the balance gets paid each month. That might seem simple enough, but any married couple will tell you that it’s not. With separate accounts, it’s very simple: You charge it, you pay it.

Now, let’s move on to your second question. What will happen if you want to take out a loan to buy a house? You could, in theory, apply for a mortgage in just your name. However, if you do, only your income will be considered when bankers consider your debt-to-income ratio — which determines how high a mortgage loan you can get approved for. So if you apply for a mortgage on your own, you two would likely not be able to buy the house that your joint income would qualify you for.

So when it comes to applying for a mortgage, applying jointly might well improve your chances of qualifying for your target amount, despite your spouse’s less than perfect credit. However (and this is a big however), although you might get approved for a larger mortgage amount, you will likely also pay more for that mortgage in the form of higher interest rates and less desirable borrowing terms because of your spouse’s credit. This can mean a difference of tens of thousands of dollars over the life of the loan.

Fortunately, you have time on your side. Unless you two plan on jumping straight into buying a home (and your fiance’s credit situation could be one reason to wait), you have plenty of time to work on improving your partner’s credit. Of course, this could be a delicate matter. Here are some tips for navigating it:

Set attractive joint long-term goals (such as buying a house), and together figure out the steps necessary to get there. If one of the steps on that path involves improving a credit score, so be it.

Educate yourselves on just how much more you’d pay in mortgage costs if your credit is less than perfect. Here’s one FICO calculator that makes the true costs of bad credit really apparent based on your target mortgage.

Look together at steps to improve credit scores. It’s often not as hard as one might think, and, within a year or two, most people can make surprising progress.

Check out personal finance website forums or join the FICO Fitness Challenge at myFICO.com, where people share experiences and tips for ways to improve credit faster.

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